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Smarter research spending would boost French innovation, says OECD

27/06/14 - Encouraging private-sector innovation, making public research institutions more accountable and channelling more funds into the most promising R&D projects would help restore France’s former prowess in science and technology, a new OECD report says.

The OECD’s Review of Innovation Policy: France recommends completing partly implemented structural changes to enable more excellence-based financing, better evaluation of public research and closer coordination between industry and the public sector. Universities should be given a greater role alongside the country’s powerful public research organisations.

The Review finds that heavy taxation of businesses and investments is holding back private-sector R&D spending. It suggests that easing overall corporate taxes and introducing more modest R&D tax credits would be a better way to drive innovation than the current system of over-generous but unevenly distributed tax credits. Public sector research funds could also be spent more effectively.

‌27/06/2014 - Arnaud Montebourg, Minister for the Economy, Economic Regeneration and the Digital Economy, for the launch of the report

The OECD’s Review of Innovation Policy: France recommends completing partly implemented structural changes to enable more excellence-based financing, better evaluation of public research and closer coordination between industry and the public sector. Universities should be given a greater role alongside the country’s powerful public research organisations.

The Review finds that heavy taxation of businesses and investments is holding back private-sector R&D spending. It suggests that easing overall corporate taxes and introducing more modest R&D tax credits would be a better way to drive innovation than the current system of over-generous but unevenly distributed tax credits. Public sector research funds could also be spent more effectively.

“There is much that France can do to better support private-sector innovation and improve how public funding is allocated. This would go a long way towards restoring French competitiveness,” said OECD Secretary-General Angel Gurría, presenting the report. “For that, it is essential to implement the needed reforms of research and innovation policy to completion.” (Read the full speech in French)

In line with the recommendation of the report to strengthen the cost-effectiveness of innovation policies, the French government established today the National Commission for the Evaluation of Innovation Policies (Commission nationale d’évaluation des politiques d’innovation). This is a welcome step in the direction of improving coordination and accountability in France’s national innovation system.

Percentage of spending on higher education R&D that is financed by industry

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Key points in the Review include:

Businesses in France spend less on R&D (1.5% of GDP) than their counterparts in Germany (2% of GDP) and other leading countries. The difference can be explained by France’s sectoral structure, particularly the small size of its manufacturing sector.

France supports start-ups but does not do enough to help small business to grow over time. The system of state R&D funding via tax credits also favours big companies or start-ups, with mid-sized firms receiving very little.

The government funded 37% of French R&D spending in 2010, or nearly 50% including research tax credits. That compares with around 30% for similar-sized countries like Germany and the United Kingdom where private industry spends more.

When measuring success in innovation by patents filed or through surveys, France holds an intermediate position internationally, behind the United States and other northern European countries like Germany but ahead of southern Europe.

France has an unduly complex public research system with high operating costs. Due to inconsistent procedures for allocating funds and researchers, there are cases of laboratories with money but no researchers and vice versa.

Universities play little part in public research, which is mostly conducted by public research organisations like the CNRS and CEA. These tend to steer their own work and lack oversight and accountability, their funding not being excellence-based.

From 2000 to 2010 France’s share of research in scientific publications fell from 4.8% to 4.3% as it faced new competition from emerging countries like China and India. France’s share of the 10% most frequently cited publications fell from 6.0% to 5.5%.

France’s “Investments for the Future” programme, a 10-year plan launched in 2010 to improve the research and innovation system takes the takes the right overall approach with built-in evaluations and a focus on excellence yet is overly complex.

For further information, or to speak to the author of the Review, please contact Catherine Bremer in the OECD Media Office (catherine.bremer@oecd.org, +33 1 45 24 80 97).